Fitch Ratings anticipates a “moderate correction” in Dubai’s residential real estate prices during the second half of 2025 and into 2026, following a significant surge in recent years. Between 2022 and the first quarter of 2025, residential property prices in Dubai increased by approximately 60%, driven by factors such as population growth, investor-friendly policies, and a robust economic environment.
A substantial increase in housing supply is expected to influence this correction. Projections indicate that around 250,000 new units will be introduced to the market between 2024 and 2026, with annual handovers estimated at 30,000 units in 2024, 90,000 in 2025, and a peak of 120,000 in 2026.
This influx represents an average annual supply growth of 16% from 2025 to 2027, surpassing the forecasted population growth of approximately 5% during the same period. Consequently, rental yields have experienced a slight decline, dropping by 30 basis points to 7.4% between the second half of 2024 and the first quarter of 2025, with expectations of further pressure due to the increased supply.
Despite these challenges, Fitch Ratings believes that UAE banks and homebuilders are well-positioned to manage the anticipated price adjustments. Improved leverage among homebuilders and reduced real estate financing exposure in banks, coupled with strong capital buffers, are expected to mitigate potential risks.
Additionally, properties in prime locations are projected to exhibit greater resilience against market corrections, attributed to a different investor profile characterized by longer holding periods and a higher tolerance for price fluctuations.
